Gold prices are surging once again as investors grapple with a complex mix of economic and political uncertainties that continue to bolster the yellow metal’s appeal as a safe-haven asset. On Tuesday, spot prices climbed above $3,330 per ounce, consolidating in a narrow range as markets balanced expectations of a breakthrough in the Ukraine conflict against lingering doubts over the US Federal Reserve’s policy outlook.
The rally comes in the wake of fresh tariffs imposed by US President Donald Trump, which have rippled through global markets. Tariff receipts in July alone topped $27 billion, a record high, but analysts note these measures act like indirect taxes, raising input costs for businesses and households, fuelling inflation, and dampening sentiment. Historically, such conditions have provided fertile ground for gold, as inflationary pressures and weakening confidence in the dollar push investors toward non-yielding assets like bullion.
Attention is now fixed on Fed Chair Jerome Powell’s forthcoming speech at the Jackson Hole symposium, where markets hope for clarity on the path of monetary policy. Traders currently price in an 84 per cent probability of a 25-basis-point rate cut in September, with another possible reduction by year-end. Lower interest rates reduce the opportunity cost of holding gold, enhancing its attractiveness compared to bonds and the dollar.
Market analysts say the short-term outlook remains volatile. Rania Gule, senior market analyst at XS.com – Mena, said gold is caught between “supportive and restrictive factors, placing investors in front of a complex and ambiguous scene”. She stressed that expectations of Fed easing remain a cornerstone of gold’s trajectory, though stronger-than-expected inflation data could slow or pause such moves, prolonging uncertainty.
Similarly, Linh Tran, another market analyst at XS.com, noted the metal is entering a “testing phase” after an extended rally. “In the short term, the key factor remains the interplay between real yields, the US dollar, and policy expectations,” Tran said. She cautioned that while the medium-term trend remains favourable, investors should stay alert to incoming data before adjusting strategies.
For now, the dollar has held its ground, buoyed by resilient US economic indicators, though analysts warn this has yet to evolve into a sustained uptrend. Markets remain torn between stubborn inflation and slowing growth — conditions that leave gold well placed to maintain its defensive role if fresh signs of weakness emerge in US labour or output data.
Geopolitics remain another decisive factor. Trump’s recent consultations with European leaders and Ukraine’s Volodymyr Zelenskiy, alongside talks with Russia’s Vladimir Putin, revived speculation of renewed peace efforts. A potential trilateral summit has been floated, but investor scepticism persists. Gule cautioned that while there are “glimmers of diplomatic progress, the path to peace is riddled with obstacles”, meaning gold is unlikely to fully lose its geopolitical hedge premium.
Longer-term structural concerns over US debt also support the case for bullion. Standard & Poor’s reaffirmed America’s sovereign rating with a stable outlook, but flagged rising fiscal deficits and debt now nearing 100 per cent of GDP. Analysts warn this could gradually erode dollar confidence, making gold an indispensable portfolio hedge.
Technically, the market is confined to a trading band of $3,330 to $3,360 an ounce, though analysts say such compression often precedes a breakout. A sustained breach above $3,450 could drive momentum toward $4,000 before year-end if the Fed adopts a dovish stance. Conversely, hawkish guidance from Powell could see a retreat toward $3,300.
Adding to the bullish outlook, UBS has raised its gold price forecasts, citing persistent US economic risks and global shifts away from dollar dominance. The Swiss bank now expects gold to reach $3,600 an ounce by end-March 2026, $3,700 by end-June 2026, and maintain that level through September 2026. UBS analysts said questions over the Fed’s independence, concerns about fiscal sustainability, and geopolitical moves to reduce reliance on the US currency are strengthening demand for gold.
In a research note, UBS also lifted its forecast for gold demand from exchange-traded funds (ETFs) in 2025 to 600 tonnes, up from its previous 450-tonne estimate, citing World Gold Council data showing the strongest inflows in the first half of this year since 2010. Central bank purchases, while likely to moderate slightly from last year’s record levels, are also expected to remain robust. The bank now forecasts total global gold demand to rise three per cent to 4,760 tonnes in 2025 — the highest level since 2011.
Such forecasts reinforce gold’s role as a strategic hedge in a time of heightened uncertainty. With inflationary pressures persisting, geopolitical risks unresolved, and structural imbalances in major economies, investors are likely to continue allocating capital to the yellow metal.
As Gule summed up: “Gold is currently caught between the Fed’s hammer and geopolitical optimism’s anvil. The supportive factors for an upside move exist but are not decisive, while downward pressures are present but not sufficient to break support levels.”
With prices already near historic highs and UBS predicting further gains ahead, gold is set to remain firmly in the spotlight through the rest of 2025 and into 2026. For investors seeking both protection and opportunity, the precious metal once again stands as a barometer of confidence and a shield against volatility.
